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Rights and Obligations In Patent Licenses
Patents are a form of property and, like other forms of property, they can be licensed or sold. Patent owners often do not want to sell a patent because they are interested in maintaining rights to the commercial benefits of the patent. However, some patent owners are willing to license a patent in order to generate additional revenue. In any event, the owner of a commercially successful patent may have competing desires. On one hand, the patent owner wants to protect the patent and secure its maximum benefit; on the other hand, the patent owner wants to avoid enforcement litigation with competitors because it is expensive and puts the patent at risk.
One vehicle for controlling the patent's use in the marketplace and securing additional revenue is a patent license. A patent license is an attractive alternative for both licensees and licensors as a means for achieving market stability. Many companies, particularly those operating in crowded technical fields, realize that license agreements can provide economic power and market leverage with competitors. Unlike the hostility and unexpected turns of patent litigation that can derail a company's budget and expose important intellectual property to invalidity, patent license negotiations are generally more cordial and allow the parties to systematically and carefully set their terms for engagement.
A patent license, like any other contract, can be simple, complex, or hyper technical as may be desired by the parties. At some time during the term of the license agreement, the parties are likely to reach an impasse on their respective views of certain issues or obligations. For instance, a dispute may arise over whether something is covered by the patent claims and possibly subject to a royalty payment, or whether reading the patent claim so it is broad enough to require a royalty renders the patent invalid. Patent validity can typically be challenged either in the U.S. district courts or in the U.S. Patent and Trademark Office (USPTO). However, there is still some uncertainty about whether any license agreement term can impact the licensee's options for challenging patent validity when the patent challenger is also a licensee of the patent. Accordingly, it is important for licensees and licensors to understand their respective rights and obligations under a patent license agreement and how any right or obligation impacts a patent validity challenge.
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